Provisional tax system Flashcards
What is provisional tax?
Provisional tax is an advance payment of income tax in quarterly installments.
When was the provisional tax system introduced in Malawi?
In 1988.
Who is subject to provisional tax?
All persons chargeable to income tax, except those below the tax-free threshold or whose income is fully subject to PAYE.
How is provisional tax calculated?
It is based on an estimate of total taxable income for the year, with at least 90% accuracy.
When is provisional tax due?
Within 25 days after the end of each quarter.
What happens if provisional tax is not paid on time?
Penalties apply based on the percentage of unpaid tax.
How does provisional tax apply to seasonal income?
Taxpayers with at least 75% seasonal income must notify the Commissioner General of their preferred payment schedule.
How is provisional tax paid in quarterly installments?
The first three quarters can be equal payments, with adjustments in the final quarter to meet at least 90% of actual tax liability.
What penalty applies if unpaid tax exceeds 50% of total tax liability?
A penalty of 30% of the unpaid amount.
What penalty applies if unpaid tax is between 10% and 50% of total tax liability?
A penalty of 25% of the unpaid amount.
Can the Commissioner General reduce or waive penalties?
Yes, if a satisfactory explanation for failure to pay is provided.
Define ‘Seasonal Income’ under the provisional tax system.
Income received mainly within any six consecutive months of the year.
What is an example of a provisional tax calculation?
If a company’s estimated taxable income is K2,000,000 and the tax rate is 30%, provisional tax for the year is K600,000, payable in quarterly installments.
